FOREX-Dollar edges up despite more bleak US economic data

* Dollar gets modest bid as investors balance portfolios

* Dismal housing, growth data weigh on US economic outlook

* U.S. firms forced to reduce costs; GM, Ford ratings cut

* Trading desks thin out as holidays approach

(Recasts, adds U.S. data, adds comment)

By Steven C. Johnson

NEW YORK, Dec 23 (Reuters) - The dollar edged up against most major currencies in thin pre-holiday trade on Tuesday as year-end demand for the greenback blunted another round of grim economic data that suggested a prolonged U.S. recession ahead.

Analysts said investors who needed to close the books on 2008 were buying back dollars to rebalance their portfolios, lending the U.S. currency modest support in midday trade.

But those taking the longer view said the prospects for the U.S. economy and currency remain worrisome, particularly after data on Tuesday confirmed the economy shrank 0.5 percent in the third quarter while home sales continued to decline.